Fair enough, QM. And of course they are changing their business model – witness UBS – they just don’t often admit it in public.

It seems to me that the great debate we are not having is what we want the system to look like. If supervisors said `here is what we want, broadly’, then everyone could critique rules on that basis. As it is, supervisors have (often disparate) ideas of what they are trying to achieve which are not publicly articulated. The rules are a result of compromises between supervisors and so are intended to push towards the desired objectives, but often they don’t because of unintended compromises, conflicts between objectives, or because they are either too strong or too weak. The whole paradigm of `do what we are thinking of based on these rules’ is flawed – here’s what we are thinking of, help us get there would be better, but it would require both honesty about objectives and the ability to articulate what they are.

I tend to agree with you DEM but I suspect authorities are scarred by the experiences of letting the regulated population determine their requirements. The scars of Basel 2 run deep.

Equally, what’s not much talked about is how the regulatory framework and system structure you want is actually a very very important social contract. In the UK it is presumed the social contract has to be tilted away from public support but the debate is loppsided, ignoring what it means on a day to day basis to end users. Vickers to his credit set out some of the tradeoff of losing a contingent liability but gaining a costlier BaU service. No one has taken his analysis much further in the public policy / social contract space.